Failure of State Soda Tax Plan Reflects Power of an Antitax Message

An ad against the soda tax on the back of a Pepsi delivery truck in Brooklyn.Credit
Earl Wilson/The New York Times

To understand why Gov. David A. Paterson’s proposed tax on sugary sodas has apparently gone down the drain — despite strong support from good-government groups, editorial pages and health advocates — it is only necessary, political analysts say, to compare these two advertising campaigns:

First, this radio ad from the Alliance for a Healthier New York, a name that only a health teacher could love. A pediatrician talks about diabetes, cancer and obesity, and says, “Helping New Yorkers lose weight is a matter of life and death.”

Next, this TV ad from New Yorkers Against Unfair Taxes, a name calculated to make the blood boil. A mother unpacks groceries in the kitchen as her son mixes a powdered lemonade, one of the drinks that would be taxed. “Tell Albany to trim their budget fat and leave our groceries alone,” the mother says.

New York’s proposed penny-an-ounce tax on soda and other sweet drinks has been a model for similar, though largely failed, proposals across the country. Now that it has been dropped from the state revenue bill, it has become a case study in the power of the antitax message.

It is too early for a final tally of the money spent on advertising and lobbying by either side in New York. But by most accounts, the beverage industry has outspent the pro-tax side and has succeeded in painting the soda tax as a naked money grab cleverly disguised as a health policy.

“I think Senator Savino probably capsulized it fairly early on brilliantly,” James D. Featherstonhaugh, a longtime lobbyist for Pepsi bottlers, said this week, speaking of State Senator Diane J. Savino, a Democrat who represents parts of Staten Island — home to a Coca-Cola distribution center — and Brooklyn.

“She called it a dubious health policy wrapped in a really regressive tax,” Mr. Featherstonhaugh said, “and that resonated pretty well across Albany.”

Similar proposals have been floated and gone nowhere in at least 10 other cities or states, including Philadelphia, Vermont, Mississippi, Kansas and Alaska, according to the American Beverage Association.

“The beverage industry takes the position that you can’t allow this to happen anywhere at any time, based on the slippery-slope theory,” Michael A. Nutter, Philadelphia’s mayor, who has proposed a 2-cents-an-ounce tax, said this week. “They’re successful the old-fashioned way. They pay for it.”

Washington State imposed a 2-cents-per-12-ounce tax on carbonated beverages for three years, and Washington, D.C., and Colorado removed sugared beverages from the list of groceries that were exempt from sales taxes, But Christopher Gindlesperger, a spokesman for the American Beverage Association, said the industry did not consider the sales tax, which touches an array of products, as bad as a per-ounce levy on soda.

The opposition managed to put a negative spin on Governor Paterson’s idea almost from its inception in the 2009 budget proposal.

The tax that the governor’s allies referred to somewhat awkwardly as a “sugary beverage tax” immediately became known in the vernacular as “the fat tax,” which sounded like a rebuke to anyone who has ever stood on a bathroom scale and winced. The governor quickly threw in the towel that first year, when he still aspired to run for election in 2010.

When the governor submitted this year’s budget proposal, he said the tax would go to offset health care cuts, a proposal that helped rally two powerful forces to his side: 1199 S.E.I.U., the health care workers’ union, and the Greater New York Hospital Association, the trade group for hospitals in the New York City area. The groups’ financial and strategic support became the mainstay of the pro-tax lobby, the Alliance for a Healthier New York.

The governor also deputized Richard F. Daines, the state health commissioner, to tour the state stumping for the tax. Dr. Daines argued that it would be good for society, especially children and teenagers who would be deterred from a lifelong soda habit. He often equated the campaign against sugary drinks to the campaign against tobacco.

Photo

Quincy Lemmon unloading a PepsiCo delivery truck with a sign against a tax on sugary beverages. The proposal was dropped from the state revenue bill.Credit
Keith Bedford for The New York Times

The Legislature apparently did not see the parallel, because while it turned down a 12-cent tax on a can of Coke, it added $1.60 to the cost of a pack of cigarettes.

The health message resonated with public-spirited groups like the New York Academy of Medicine and editorial writers. Enter New Yorkers Against Unfair Taxes, set up by the beverage industry, grocers and the Teamsters, who work as drivers and in production. The organization’s Web site describes it as a humble coalition of “hard-working individuals, struggling families and already burdened small businesses,” like Benny’s Pizza and Kay’s Deli.

But behind the scenes, much of the strategic work came from Goddard Claussen, the public affairs company whose “Harry and Louise” commercials helped defeat President Bill Clinton’s health care overhaul efforts. The company was retained by the American Beverage Association to lobby against the New York tax.

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Goddard Claussen took credit on its Web site for the New Yorkers Against Unfair Taxes campaign. “As part of a comprehensive outreach effort, we recruited over 10,000 citizens and 158 businesses to join New Yorkers Against Unfair Taxes,” the agency said before the page was removed from its online portfolio on Friday. Calls to agency executives about the deletion were not returned.

Ignoring academic studies showing that sugar-sweetened beverages are a big source of excess calories in the American diet, the antitax forces argued that the tax was based on dubious science, because obesity is a matter of how many calories people consume, not where those calories come from.

“If what you want to do is tax calories, why don’t you tax all calories?” Mr. Featherstonhaugh said, noting that he had just eaten a Reese’s Peanut Butter Cup. “Let’s start with those peanut butter cups, or perhaps potato chips, or McDonald’s, Krispy Kreme.”

The idea that the soda tax would cut into the income of poor New Yorkers while doing nothing to improve their access to exercise or fresh, affordable, healthful food was echoed by some advocacy groups for the poor. For example, Triada Stampas, the director of government relations for the Food Bank of New York City, testified against the tax before a Senate committee.

PepsiCo’s world headquarters is in Purchase, N.Y., and lawmakers in the Westchester County area and in districts with bottling companies of all kinds quickly lined up against the tax. The economic argument resonated even with some Democrats who otherwise tend to favor taxation.

But Mr. Featherstonhaugh said PepsiCo had specifically instructed its representatives not to raise the threat of job loss, because, he said, Pepsi wanted to be a good corporate citizen.

State Senator Jeffrey D. Klein, a Democrat whose Bronx and Westchester district includes a large Pepsi distribution plant, voted for last year’s bottle bill, which mandated 5-cent deposits on bottled water. He said he did so because it supported the environment, even though beverage companies complained that it would hurt their bottom line. But he said, “Having another hit like this, I think, would devastate the industry.

Some opponents suggested that New Yorkers would try to evade the tax by buying soda on Indian reservations, where some smokers go to find tax-free cigarettes, or by crossing the border to New Jersey, harming New York retailers.

Kevin Finnegan, the political director of 1199 S.E.I.U., had a simple explanation for the soda tax defeat: money. “We were outgunned,” he said. “I think that their marketing was really sophisticated and effective. Obviously it was a tax. But taxes have served many purposes to discourage or encourage behavior.”

Final lobbyist filings are not yet in, but estimates of the amount spent by the Alliance for a Healthier New York range from $2.5 million, by Mr. Finnegan’s count, to $5 million, by the beverage industry’s count.

The American Beverage Association spent $9.4 million in the first four months of the year to oppose New York’s soda tax, according to a search of public lobbying records by the New York State Healthy Eating and Physical Activity Alliance. All but $120,000 went to Goddard Claussen for “strategic advocacy.”

“I think, at the end of the day, this was a fair fight,” said Michael McKeon, an organizer with New Yorkers Against Unfair Taxes. “When you consider they had the union resources and all the time and money that government put in, that money should count in the final calculation.”

A version of this article appears in print on July 3, 2010, on Page A14 of the New York edition with the headline: Failure of State Soda Tax Plan Reflects Power of an Antitax Message. Order Reprints|Today's Paper|Subscribe